Marathon Petroleum Corp. Reports Fourth-quarter Results

Company Marathon Petroleum Corporation 
Tags Refining & Marketing Activities, Strategy - Downstream, Pipelines/ tankers/ distribution, Guidance, Strategy - Corporate, Financial & Operating Data
Date February 07, 2019
  • Reported fourth-quarter earnings of $951 million, or $1.35 per diluted share; results included costs of $1.06 per diluted share primarily from transaction-related items
    • Refining and Marketing segment income from operations of $923 million driven by high utilization and wide crude differentials
    • Midstream segment income from operations of $889 million supported by volume growth
    • Retail segment income from operations of $613 million with strong margins
  • Returned $4.2 billion of capital to shareholders in 2018, including $675 million in share repurchases in the fourth quarter
  • Announced 15% increase in quarterly dividend to $0.53 per share

Marathon Petroleum Corp. (NYSE: MPC) today reported fourth-quarter 2018 earnings of $951 million, or $1.35 per diluted share. Earnings included costs of $745 million, or $1.06 per diluted share, due to purchase accounting related inventory effects, expenses associated with the Andeavor combination, and MPLX debt extinguishment costs. This compares with $2.02 billion, or $4.09 per diluted share, in the fourth quarter of 2017. Fourth quarter 2017 results included a benefit of $1.5 billion, or $3.04 per diluted share, resulting from a change in the corporate tax rate."

This extraordinary fourth quarter represents an early indication of the tremendous value creation opportunities resulting from this powerful combination," said Gary R. Heminger, chairman and chief executive officer. "By executing the strategy outlined during our recent Investor Day, we have realized $160 million of synergies in just three months and continue to expect total annual gross run-rate synergies of up to $600 million at year-end 2019 and $1.4 billion by the end of 2021."

Heminger continued, "These successes combined with a favorable refining margin environment and record performance in our retail segment propelled significant earnings growth during the quarter. Despite normal seasonal trends, we remain optimistic about the prospects for our business in 2019.  The transformative combination we have undertaken this past year not only expands our platform and broadens our commercial opportunities, we believe it uniquely positions us to capture market opportunities, enhance the stability of our cash flow, and create long-term value for our shareholders."

In 2018, MPC returned $4.2 billion of capital to shareholders, including $3.3 billion of share repurchases. Additionally, on January 28, 2019, MPC announced a 15 percent increase in the quarterly dividend, to $0.53 per share.  The company remains committed to returning at least 50 percent of discretionary free cash flow* to shareholders over the long term through a combination of dividends and share repurchases while maintaining its investment grade credit profile.

Full-year 2018 earnings were $2.78 billion, or $5.28 per diluted share, compared with $3.43 billion, or $6.70 per diluted share, for full-year 2017. 2018 earnings reflect one quarter of results from the combined business following the closing of the Andeavor acquisition on October 1, 2018.  Full-year earnings also included costs of $789 million, or $1.50 per diluted share, primarily due to purchase accounting related inventory effects and expenses associated with the  Andeavor combination. 2017 earnings included a net benefit of $1.5 billion, or $2.93 per diluted share, resulting from a change in the corporate tax rate.

Total income from operations was $2.02 billion in the fourth quarter of 2018 and $5.57 billion for full-year 2018, compared with $1.17 billion in the fourth quarter of 2017 and $4.02 billion for full-year 2017. MPC reported adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) of $4.1 billion for the fourth quarter 2018 as compared to $1.8 billion for fourth quarter 2017. See accompanying reconciliation table.

*Discretionary free cash flow = operating cash flow less maintenance and regulatory capital

Synergy Update and Other Items

MPC realized $160 million of synergies related to the Andeavor combination in the fourth quarter.  Approximately 60 percent were commercial synergies primarily related to crude acquisition and supply.  The remaining synergy capture was the result of implementing refining best practices and expertise across the new enterprise as well as procurement and corporate synergies.

Fourth quarter 2018 results included several factors that reduced reported earnings.  MPC's Refining & Marketing (R&M) segment results included estimated costs of $759 million reflecting the difference between recording acquired inventory at fair value on the closing date of the acquisition under purchase accounting and the costs used to value inventory at year end. MPC also incurred $183 million of transaction-related costs for financial and legal advisors, employee severance, and other expenses in connection with the Andeavor acquisition.  Lastly, MPLX incurred approximately $60 million of debt extinguishment costs.

Segment Results 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(In millions)    2018      2017      2018      2017 
Income from Operations by Segment                       
Refining & Marketing(a)  923      732      2,481      2,321   
Retail    613        148        1,028        729   
Midstream    889        343        2,752        1,339   
Items not allocated to segments:                       
    Corporate and other unallocated items    (233)        (114)        (502)        (365)   
    Transaction-related costs    (183)        —        (197)        —   
    Litigation    —        57        —        (29)   
    Impairments                      23   
        Income from operations  2,017      1,168      5,571      4,018   
 

(a)  R&M segment results for the 2018 periods included estimated costs of $759 million due to purchase accounting related inventory effects. 

Refining & Marketing

R&M segment income from operations was $923 million in the fourth quarter of 2018 and $2.48 billion for full-year 2018. Results for the fourth quarter and full-year 2018 included estimated costs of $759 million due to purchase accounting related inventory effects. Fourth quarter and full-year 2017 segment income from operations was $732 million and $2.32 billion, respectively.

The increase in quarter-over-quarter segment results was primarily due to higher throughputs as a result of the Andeavor combination as well as wider WCS- and WTI-based crude differentials. Total refinery utilization was 94 percent during the quarter, resulting in total throughputs of 3.1 million barrels per day, compared to 2.0 million barrels per day in fourth quarter 2017. These favorable effects more than offset the $231 million reduction in R&M segment results associated with the February 1, 2018 dropdown transaction. Prior period R&M segment results do not reflect the impact of the dropdown.

The U.S. Gulf Coast, Chicago, and West Coast blended industry 3-2-1 crack spread was $9.43 in the fourth quarter of 2018 compared to $10.83 in the fourth quarter of 2017. These crack spreads are net of RIN crack adjustments of $0.95 and $3.99 for the fourth quarter of 2018 and 2017, respectively.

Midstream

Midstream segment income from operations, which primarily reflects the results of MPLX and Andeavor Logistics, was $889 million in the fourth quarter of 2018 and $2.75 billion for full-year 2018, compared with $343 million and $1.34 billion for the fourth quarter and full-year 2017, respectively.

The increase in quarterly results was primarily due to contributions of $230 million from Andeavor Logistics, and $231 million from the February 1, 2018, dropdown of refining logistics and fuels distribution services to MPLX.  Prior-period Midstream results do not reflect the impact of these items.  The remaining $85 million increase in Midstream segment results was driven primarily by MPLX's record pipeline throughput volumes as well as record gathered and processed volumes.

Retail

Retail segment income from operations was $613 million in the fourth quarter of 2018 and $1.03 billion for full-year 2018, compared with $148 million in the fourth quarter of 2017 and $729 million for full-year 2017.

Fourth quarter 2018 results represented a record quarter for MPC's former Speedway segment, even before considering the significant earnings contribution from the legacy Andeavor retail operations.  The increase in quarter-over-quarter segment results was primarily due to higher fuel margins and merchandise sales across the combined platform.  The retail fuel margin increased to 32.35 cents per gallon in the fourth quarter of 2018 from 17.72 cents per gallon in the fourth quarter of 2017.

MPC continues to make progress converting the acquired company owned-and-operated stores to the Speedway brand, converting 170 sites in Minnesota in the fourth quarter.  The company also converted 34 locations to company owned-and-operated stores during the quarter, allowing the company to benefit from merchandise sales at these locations.

Items Not Allocated to Segments

Items not allocated to segments totaled $408 million of expenses in the fourth quarter of 2018 compared to $55 million in the fourth quarter of 2017. The increase for the quarter was primarily due to $183 million of transaction related costs associated with the Andeavor acquisition and the absence of a $57 million litigation gain recognized in fourth quarter 2017.  The balance of the increase largely reflects the increased corporate costs and expenses following the acquisition.

Strong Financial Position and Liquidity

On Dec. 31, 2018, the company had $1.61 billion in cash and cash equivalents (excluding MPLX and ANDX's cash and cash equivalents of $68 million and $10 million, respectively), $5.0 billion available under a revolving credit agreement, $1 billion available under a 364-day bank revolving credit facility and $750 million available under its trade receivables securitization facility.

In connection with the redemption of its Senior Notes due 2023 during the quarter, MPLX incurred approximately $60 million of debt extinguishment costs.

Conference Call

At 9 a.m. EST today, MPC will hold a conference call and webcast to discuss the reported results and provide an update on company operations. Interested parties may listen by visiting MPC's website at  and clicking on the "2018 Fourth-Quarter and Full-Year Financial Results" link. A replay of the webcast will be available on the company's website for two weeks. Financial information, including the earnings release and other investor-related material, will also be available online prior to the conference call and webcast at  .

Consolidated Statements of Income 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(In millions, except per-share data)  2018    2017    2018    2017 
Revenues and other income:                       
    Sales and other operating revenues(a)  32,151      20,884      95,750      74,104   
    Sales to related parties    182        171        754        629   
    Income from equity method investments    111        82        373        306   
    Net gain (loss) on disposal of assets    17        (2)        23        10   
    Other income    80        101        202        320   
        Total revenues and other income    32,541        21,236        97,102        75,369   
Costs and expenses:                       
    Cost of revenues (excludes items below)(a)    28,112        18,855        85,456        66,519   
    Purchases from related parties    182        150        610        570   
    Depreciation and amortization    874        540        2,490        2,114   
    Selling, general and administrative expenses    1,147        408        2,418        1,694   
    Other taxes    209        115        557        454   
        Total costs and expenses    30,524        20,068        91,531        71,351   
Income from operations    2,017        1,168        5,571        4,018   
    Net interest and other financial costs    385        209        1,003        674   
Income before income taxes    1,632        959        4,568        3,344   
    (Benefit) provision for income taxes    437        (1,166)        962        (460)   
Net income    1,195        2,125        3,606        3,804   
Less net income attributable to:                       
Redeemable noncontrolling interest    20        16        75        65   
Noncontrolling interests    224        93        751        307   
Net income attributable to MPC  951      2,016      2,780      3,432   
                       
Per-share data                       
Basic:                       
    Net income attributable to MPC per share  1.38      4.13      5.36      6.76   
    Weighted average shares:    687        488        518        507   
Diluted:                       
    Net income attributable to MPC per share  1.35      4.09      5.28      6.70   
    Weighted average shares:    704        493        526        512   
 

(a)  The 2017 periods include consumer excise taxes. In 2018, most of the consumer excise taxes are reported on a net basis following the January 1, 2018 adoption of ASC 606 - Revenue from Contracts with Customers. 

Income Summary 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(In millions)  2018(a)    2017    2018(a)    2017 
Income from Operations by segment                       
  Refining & Marketing(b)  923      732      2,481      2,321   
  Retail    613        148        1,028        729   
  Midstream    889        343        2,752        1,339   
  Items not allocated to segments:                       
      Corporate and other unallocated items    (233)        (114)        (502)        (365)   
      Transaction-related costs(c)    (183)        —        (197)        —   
      Litigation    —        57        —        (29)   
      Impairments                      23   
Income from operations    2,017        1,168        5,571        4,018   
Net interest and other financial costs(d)    385        209        1,003        674   
Income before income taxes    1,632        959        4,568        3,344   
(Benefit) provision for income taxes    437        (1,166)        962        (460)   
Net income    1,195        2,125        3,606        3,804   
Less net income attributable to:                       
Redeemable noncontrolling interest    20        16        75        65   
Noncontrolling interests    224        93        751        307   
Net income attributable to MPC  951      2,016      2,780      3,432   
                       

(a)   Includes the results of Andeavor from the October 1, 2018 acquisition date forward. 
(b)  R&M segment results for the 2018 periods included estimated costs of $759 million due to purchase accounting related inventory effects. 
(c)  Includes costs related to the Andeavor acquisition including financial advisor and legal fees, employee severance, and other expenses. 
(d)  The 2018 periods include approximately $60 million related to the extinguishment of MPLX debt. 

Capital Expenditures and Investments 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(In millions)  2018(a)    2017    2018(a)    2017 
Refining & Marketing  444      262      1,057      832   
Retail    235        160        460        381   
Midstream    954        488        2,630        1,755   
Corporate and Other(b)    60        46        157        138   
    Total  1,693      956      4,304      3,106   
 
(a)        Includes the results of Andeavor from the October 1, 2018 acquisition date forward. 
(b)        Includes capitalized interest of $25 million, $16 million, $80 million and $55 million, respectively. 

Refining & Marketing Operating Statistics (Unaudited) 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
  2018    2017    2018    2017 
R&M refined product sales volume (mbpd)(a)    3,764        2,414        2,703        2,301   
R&M margin (dollars per barrel)(b)  15.07      13.12      14.03      12.60   
Crude oil capacity utilization (percent)(c)    94        101        96        97   
Refinery throughputs (mbpd):(d)                       
    Crude oil refined    2,857        1,837        2,081        1,765   
    Other charge and blendstocks    254        187        193        179   
        Total    3,111        2,024        2,274        1,944   
Sour crude oil throughput (percent)    50        53        52        59   
Sweet crude oil throughput (percent)    50        47        48        41   
Refined product yields (mbpd):(d)                       
    Gasoline    1,593        997        1,107        932   
    Distillates    1,111        679        773        641   
    Propane    53        40        41        36   
    Feedstocks and special products    273        254        288        277   
    Heavy fuel oil    62        42        38        37   
    Asphalt    74        62        69        63   
        Total    3,166        2,074        2,316        1,986   
Refinery direct operating costs ($/barrel):(e)                       
    Planned turnaround and major maintenance  1.49      1.80      1.59      1.72   
    Depreciation and amortization    1.32        1.38        1.31        1.43   
    Other manufacturing(f)    5.11        4.03        4.20        4.07   
        Total  7.92      7.21      7.10      7.22   
    Memo: Total includes turnaround costs ($/barrel) of: (g)  0.79      0.57      0.79      0.71   
 

(a)  Includes intersegment sales. 
(b)  Sales revenue less cost of refinery inputs and purchased products, divided by total refinery throughputs. 
(c)  Based on calendar day capacity, which is an annual average that includes downtime for planned maintenance and other normal operating activities. 
(d)  Excludes inter-refinery volumes of 85 mbpd and 88 mbpd for fourth quarter 2018 and 2017, respectively, and 61 mbpd and 78 mbpd for the full-year 2018 and 2017, respectively. 
(e)  Per barrel of total refinery throughputs. 
(f)  Includes utilities, labor, routine maintenance and other operating costs. 
(g)  Reflects costs for turnaround activity which we expense as incurred. 

Refining & Marketing Operating Statistics by Region (Unaudited) 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
  2018    2017    2018    2017 
Gulf Coast                       
Refinery throughputs (mbpd):(a)                       
    Crude oil refined    1,177        1,158        1,135        1,070   
    Other charge and blendstocks    197        237        190        224   
        Total    1,374        1,395        1,325        1,294   
Sour crude oil throughput (percent)    60        62        62        71   
Sweet crude oil throughput (percent)    40        38        38        29   
Refined product yields (mbpd):(a)                       
    Gasoline    622        608        574        546   
    Distillates    467        440        432        405   
    Propane    28        29        25        26   
    Feedstocks and special products    260        313        291        311   
    Heavy fuel oil    20        30        18        25   
    Asphalt    16        17        19        17   
        Total    1,413        1,437        1,359        1,330   
Refinery direct operating costs ($/barrel):(b)                       
    Planned turnaround and major maintenance  0.61      1.45      1.12      1.75   
    Depreciation and amortization    1.03        1.05        1.03        1.12   
    Other manufacturing(c)    3.35        3.55        3.41        3.74   
        Total  4.99      6.05      5.56      6.61   
                       
Mid-Continent                       
Refinery throughputs (mbpd):(a)                       
    Crude oil refined    1,069        679        792        695   
    Other charge and blendstocks    72        38        47        33   
        Total    1,141        717        839        728   
Sour crude oil throughput (percent)    26        36        33        40   
Sweet crude oil throughput (percent)    74        64        67        60   
Refined product yields (mbpd):(a)                       
    Gasoline    617        389        444        386   
    Distillates    398        239        279        236   
    Propane    18        12        14        11   
    Feedstocks and special products    36        27        43        42   
    Heavy fuel oil    19        13        14        13   
    Asphalt    58        45        50        46   
        Total    1,146        725        844        734   
Refinery direct operating costs ($/barrel):(b)                       
    Planned turnaround and major maintenance  1.67      2.25      1.97      1.48   
    Depreciation and amortization    1.60        1.86        1.67        1.81   
    Other manufacturing(c)    5.08        4.46        4.34        4.26   
        Total  8.35      8.57      7.98      7.55   
                       
West Coast                       
Refinery throughputs (mbpd):(a)                       
    Crude oil refined    611        —        154        —   
    Other charge and blendstocks    70        —        17        —   
        Total    681        —        171        —   
Sour crude oil throughput (percent)    72        —        72        —   
Sweet crude oil throughput (percent)    28        —        28        —   
Refined product yields (mbpd):(a)                       
    Gasoline    354        —        89        —   
    Distillates    246        —        62        —   
    Propane          —              —   
    Feedstocks and special products    56        —        14        —   
    Heavy fuel oil    29        —              —   
    Asphalt    —        —        —        —   
        Total    692        —        174        —   
Refinery direct operating costs ($/barrel):(b)                       
    Planned turnaround and major maintenance  2.79      —      2.79      —   
    Depreciation and amortization    1.26        —        1.26        —   
    Other manufacturing(c)    8.07        —        8.07        —   
        Total  12.12      —      12.12      —   
 
(a)     Includes inter-refinery transfer volumes. 
(b)     Per barrel of total refinery throughputs. 
(c)     Includes utilities, labor, routine maintenance and other operating costs. 

Retail Operating Statistics (Unaudited) 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
  2018    2017    2018    2017 
Speedway fuel sales (millions of gallons)    1,976        1,467        6,293        5,799   
Direct dealer fuel sales (millions of gallons)    644        N/A        644        N/A   
Retail fuel margin (dollars per gallon)(a)  0.3235      0.1772      0.2230      0.1738   
Merchandise sales (in millions)  1,479      1,200      5,232      4,893   
Merchandise margin (in millions)  417      337      1,486      1,402   
Merchandise margin percent    28.2      28.1      28.4      28.7 
Same store gasoline sales volume (period over period)(b)    (0.7)      (0.3)      (1.5)      (1.3) 
Same store merchandise sales (period over period)(b)(c)    6.5      0.5      4.2      1.2 
Total convenience stores at period-end    3,923        2,744               
Direct dealer locations at period-end    1,081        N/A               
 
(a)     Includes bankcard processing fees (as applicable). 
(b)       Same store comparison includes only locations owned at least 13 months. 
(c)     Excludes cigarettes. 

Midstream Operating Statistics (Unaudited) 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
  2018    2017    2018    2017 
Pipeline throughputs (mbpd)(a)    5,612        3,610        4,177        3,377   
Terminal throughput (mbpd)    3,188        1,497        1,901        1,477   
Gathering system throughput (million cubic feet per day)(b)    5,893        4,181        4,779        3,608   
Natural gas processed (million cubic feet per day)(b)    8,161        6,828        7,199        6,460   
C2 (ethane) + NGLs fractionated (mbpd)(b)    501        423        464        394   
                       

(a)  Includes common-carrier pipelines and private pipelines contributed to MPLX. Excludes equity method affiliate pipeline volumes. 
(b)  Includes amounts related to unconsolidated equity method investments on a 100% basis. 

Select Financial Data (Unaudited) 
 
(In millions)  December 31, 
2018 
  September 30
 2018 
Cash and cash equivalents  1,687      4,992   
MPLX debt    13,393        12,890   
ANDX debt    4,973        N/A   
Total consolidated debt    27,524        18,449   
Redeemable noncontrolling interest    1,004        1,003   
Equity    44,084        19,031   
Shares outstanding    680        451   
           
Cash provided from operations (quarter ended)  2,727      1,182   

  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
  2018    2017    2018    2017 
Dividends paid per share  0.46      0.40      1.84      1.52   

Reconciliation of Adjusted Earnings Before Interest, Taxes, Depreciation & Amortization (Adjusted EBITDA) to Net Income Attributable to MPC 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(In millions)  2018    2017    2018    2017 
Adjusted EBITDA(a)                       
  Refining & Marketing  2,321      1,115      5,072      3,904   
  Retail    738        226        1,381        1,004   
  Midstream    1,197        514        3,637        2,038   
  Corporate and other unallocated items    (205)        (100)        (424)        (307)   
Total Adjusted EBITDA(a)    4,051        1,755        9,666        6,639   
Less:                       
Depreciation & amortization    (874)        (540)        (2,490)        (2,114)   
Turnaround costs    (226)        (106)        (658)        (501)   
Purchase accounting related inventory effects    (759)        —        (759)        —   
Transaction-related costs    (183)        —        (197)        —   
Litigation    —        57        —        (29)   
Impairments                      23   
Income from operations    2,017        1,168        5,571        4,018   
Net interest and other financial costs    385        209        1,003        674   
Income before income taxes    1,632        959        4,568        3,344   
(Benefit) provision for income taxes    437        (1,166)        962        (460)   
Net income    1,195        2,125        3,606        3,804   
Less net income attributable to:                       
Redeemable noncontrolling interest    20        16        75        65   
Noncontrolling interests    224        93        751        307   
Net income attributable to MPC  951      2,016      2,780      3,432   
                       

(a)  Adjusted EBITDA represents earnings before net interest and other financial costs, income taxes, depreciation and amortization expense as well as adjustments to exclude R&M turnaround costs and the purchase accounting related inventory effects reported in fourth-quarter 2018 R&M segment results. We believe this non-GAAP financial measure is useful to investors and analysts to analyze and compare our operating performance between periods by excluding items that do not reflect the core operating results of our business. We also believe that excluding turnaround costs from this metric is useful for comparability to other companies as certain of our competitors defer these costs and amortize them between turnarounds. Adjusted EBITDA should not be considered as a substitute for, or superior to net income attributable to MPC, income before income taxes, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. 

Reconciliation of Refining & Marketing Income from Operations to Refining & Marketing Margin 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(In millions)  2018    2017    2018    2017 
Refining & Marketing income from operations  923      732      2,481      2,321   
Plus (Less):                       
Refinery direct operating costs(a)    1,889        1,084        4,801        4,113   
Refinery depreciation and amortization    377        258        1,089        1,013   
Other:                       
Operating expenses, net(a)(b)    1,088        350        3,189        1,425   
Depreciation and amortization    36        19        85        69   
Refining & Marketing margin(c)  4,313      2,443      11,645      8,941   
 

(a)  Excludes depreciation and amortization. 
(b)  Includes fees paid to MPLX for various midstream services. MPLX's results are reported in MPC's Midstream segment. 
(c)  Refining & Marketing margin is defined as sales revenue less cost of refinery inputs and purchased products, excluding any LCM inventory market adjustment. We believe this non-GAAP financial measure is useful to investors and analysts to assess our ongoing financial performance because, when reconciled to its most comparable GAAP measure, it provides improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. This measure should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly titled measures reported by other companies. 

Reconciliation of Retail Income from Operations to Retail Total Margin 
 
  Three Months Ended
 December 31, 
  Twelve Months Ended
 December 31, 
(in millions)  2018    2017    2018    2017 
Retail income from operations  613      148      1,028      729   
Plus (Less):                       
Operating, selling, general and administrative expenses    593        400        1,796        1,533   
Depreciation and amortization    125        78        353        275   
Income from equity method investments    (23)        (15)        (74)        (69)   
Net gain on disposal of assets    (16)        (2)        (17)        (14)   
Other income    (2)        (5)        (7)        (14)   
Retail total margin  1,290      604      3,079      2,440   
                       
Retail total margin:(a)                       
Fuel margin  848      260      1,547      1,008   
Merchandise margin    417        337        1,486        1,402   
Other margin    25              46        30   
Retail total margin  1,290      604      3,079      2,440   
 

(a)  Fuel margin includes bankcard processing fees (as applicable). Merchandise margin is defined as the price paid by consumers less the cost of merchandise. We believe these non-GAAP financial measures are useful to investors and analysts to assess our ongoing financial performance because, when reconciled to the most comparable GAAP measures, they provide improved comparability between periods through the exclusion of certain items that we believe are not indicative of our core operating performance and that may obscure our underlying business results and trends. These measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP, and our calculations thereof may not be comparable to similarly titled measures reported by other companies. 

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd